Double-digit fee growth for A&O, Links and CC but Freshfields stalls
Dramatic swings in foreign currencies against Brexit-battered sterling have lifted reported results from London’s big four, with double-digit growth rates for Allen & Overy (A&O), Clifford Chance (CC) and Linklaters. Freshfields Bruckhaus Deringer’s growth, however, has stalled in what has been a record year for the Magic Circle.
Despite muted growth in the financial year 2015/16, A&O was the standout performer in the Magic Circle. A&O’s revenue jumped 16% to £1.519bn, while profits per equity partner (PEP) soared 25% to £1.51m, according to unaudited results.
The strong showing from A&O comes after a decade of above-trend growth from the firm, which in the mid-2000s trailed far behind the other three firms in revenue terms. This year it has overtaken Freshfields to become the second-highest grossing London firm and is only just behind CC.
Speaking to Legal Business, Andrew Ballheimer, A&O’s global managing partner said: ‘It is a result of our continued investment. If you look at offices that have done pretty well, they are the UK, Africa, Middle East, Australia, Hong Kong and the US. The impact of sterling has made a bunch of targets more attractive to overseas buyers.
‘It is not a coincidence that there has been an increase in M&A UK targets,’ Ballheimer said, adding: ‘Interestingly, UK outbound investment has also been strong in recent months and M&A activity in western Europe is set to continue at a high level for the second half of this year.’
Despite being last year’s top performer, Freshfields’ revenue was flat for the financial year 2016/17 at £1.33bn, while PEP was also muted – increasing 5% to £1.545m. The firm’s joint managing partner Stephan Eilers commented: ”Why flat? To be honest, we don’t know. The economic development of firms has become so volatile that we cannot point to a specific area or development. The normal experience is that either one of the transactional practices move forward or the contentious practices have a good year. This year it has been solid or flat all over, so we didn’t have this compensatory mechanism.’
Meanwhile, CC saw both revenue and PEP rise 11%. Revenue increased from £1.386bn to £1.54bn and PEP grew from £1.23m to £1.37m.
Global revenue at Linklaters rose 10% in 2016/17 to £1.438bn in a record high for the firm. Pre-tax profit at £664.4m was flat on the previous year in constant currency terms and excluding one-offs. Compared to last year’s £611.9m, Linklaters’ pre-tax profit rose 9% in sterling terms. Its PEP increased 8% to £1.51m. Stripping out the impact of currency changes, Linklaters said revenue growth was 2%.
Linklaters managing partner Gideon Moore told Legal Business that although a lot of revenue is generated in euros or dollars, much of the firm’s expenses are also in these currencies.
He added: ‘As far as business is concerned, Brexit is not having a huge impact at the moment. There was a relative slowdown in M&A activity in the one or two months immediately after the referendum, but then opportunities arose because the UK currency became cheaper.’
kathryn.mccann@legalease.co.uk
2016/17 results – London’s big four
| G100 rank | Firm | Revenue | % change | PEP | % change |
|---|---|---|---|---|---|
| 7 | Clifford Chance | £1.54bn | 11% | £1,370,000 | 11% |
| 8 | Allen & Overy | £1.519bn | 16% | £1,510,000 | 25% |
| 10 | Linklaters | £1.438bn | 10% | £1,510,000 | 8% |
| 14 | Freshfields Bruckhaus Deringer | £1.33bn | 0% | £1,545,000 | 5% |